Tuesday, 17 December 2013
Swedish central bank, the Riksbank cut its repo rate by 0.25 percentage
points. That is the repo rate is cut by 0.25 percentage points to 0.75
per cent as the Riksbank Governor, Stefan Ingves came under the
pressure to stem the persistently low inflation figures.

The Riksbank writes that economic activity is developing largely as the
Riksbank had forecast earlier. However, inflation has been unexpectedly
low and, despite the recovery, inflationary pressures over the coming
year are expected to be much lower than in the most recent forecast in
October.

This has thus led to the first rate cut in a year, after five decisions
to stand against critics and keep the interest rate unchanged.
To stimulate some spending and push inflationary condition up somewhat,
the bank says it aim for cutting the rates is to contribute to
inflation rising towards 2 per cent, and to make a downward adjustment
in the repo-rate path for the entire forecast period. Slow increases in
the repo rate are not expected to begin until the start of 2015. The
risks linked to high household indebtedness remain, but the low
inflation rate justifies cutting the repo rate, according to the
Executive Board of the bank.

Most analysts had expected a decrease, especially after the autumn
statement on surprisingly low inflation. Lower interest rates provide
the economy with stimulus and expected to put upward pressure on
inflation which is currently the lowest, 0.1 percent annual rate.
Those critics who long advocated a rate cut had a field day in the last
week's economic statistics, which showed that the Riksbank
significantly overestimated the inflation pressure in both October as
November.

The Riksbank writes that Inflation has recently been unexpectedly low,
with weak developments in prices of goods and services. At the same
time, domestic cost pressures have been higher than inflation. This
indicates that companies have had difficulty in passing on their higher
costs through higher prices, which in turn may be due to weak demand.
Compared with the most recent assessment in October, inflation is now
expected to be much lower over the coming year.
By Scancomark.com Team